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THE CLOSURE OF a tax avoidance loophole is expected to net the state €50 million – but it has been claimed a proper crackdown should yield 10 times that figure.
Finance Minister Michael Noonan announced in yesterday’s budget that the government will move to close off a legal loophole that allowed many large vulture funds to avoid paying large amounts of tax.
A clause in an act from 1997 allowed large businesses and vulture funds to set up a qualifying ‘section 110′ company that could operate effectively tax-neutral.
Many major funds, which have acquired distressed Irish assets worth hundreds of millions of euro, used the loophole to register as charities and pay very small amounts of tax – as low as €250 in several cases.
Last month Noonan announced that the Department of Finance was looking at ways to deal with the loophole, changes which he said would be in a new Finance Act that is expected to be passed before the end of 2016.
In budget documents published yesterday, it was estimated that amendments to section 110 to address the “unintended uses of the section”, alongside “further amendments (which) will address other issues arising in relation to funds and property” will yield €50 million in 2017.
Underestimating
However, that number has been criticised by independent TD Stephen Donnelly, one of the first to highlight the back-door use of the legislation.
Speaking to Fora, he said that the government is either dramatically underestimating how much will be taken in from closing off the loophole or the issue is still not being properly addressed.
“Either it is a placeholder made low to keep expectations low or their are not intending to cut it out properly at all,” he said.
If you are not getting hundreds of millions of euro than we are not shutting it down as there is hundreds of millions or euro being avoided.
When asked how much the state could collect, Donnelly pointed to his own submission to the government identifying that vulture funds have purchased about €40 billion in Irish assets in recent years.
It said that, assuming vulture funds would expect an annual yield of about 8% from their assets, there is about €3 billion to €4 billion on annual Irish income going untaxed. Taxing this income would add approximately €1 billion per year to the fiscal space.
“Fairly straightforward maths would suggest that taxing this income would suggest (the state) would receive about €1 billion. Assuming that there is some leakage on that it should still be at about €500 million,” he said.
“If we’re not hitting €500 million, we’re not shutting it down properly. I understand why they would try to play down the potential yield, but I hope it isn’t a genuine estimate of their effort.”
Unintended uses
While announcing the budget yesterday, Noonan admitted that section 110 “is now being used in relation to property in a way that was never intended”.
He said: “I have published draft amendments to section 110, to address these unintended uses.
I am aware that further amendments are necessary to address other issues arising in relation to funds and property. I will publish these in the Finance Bill after appropriate consultation has taken place.”
Noonan also announced several measures to reduce offshore tax evasion in response to the revelations contained in the Panama Papers. The government estimated that these measures will yield about €30 million.
Written by Paul O’Donoghue and posted on Fora.ie
Meanwhile, the fatcat bond holders were compensated fully. Didn’t happen though when ordinary working men and women were persuaded by Mary O Rourke to beg borrow or steal to buy shares in Eircom…..
You may be sure that the majority of the managers and higher level workers lost out on nothing . As usual Mulvey, an ex trade union leader, is a disgrace !
Bloody whingers they were happy when the bank was doing well.
They were happy when the bonuses were coming in.
Lucky to be getting anything should only be statutory and be glad of it.
Frankly, they suffer because they are playing golf with the wrong crowd
My heart bleeds
No bank in receipt of state funds should have been allowed to offer anything beyond statutory redundancy. Maybe not a reflection on the person but the company was dead. I await with interest to see where John Moran pops up now he has allowed recapitalisation of banks.
Staff who resigned not entitled to redundancy… Shock Horror
my dad got his mortgage from anglo when it was a fella in an office.he got €4000 to build the house in dublin, and in the height the house was worth €650,000. in walkinstown. mental stuff
But he built it in the rare old times yeah ?
Anglo Irish Bank never offered residential mortgages
rare old times is right mate. even in walkintown… the house is big and had an extension with utility room and jax. it really makes ye remember how crazy it all was
Maybe I’m Missing something, but if you leave a job for a better offer, even if the company you work for is in trouble, you are not entitled to any redundancy. How is this even an issue for reporting in the media????
I have no sympathy for Anglo staff they did a crap job building a busted bank, paid themselves well and the country was left holding a bill for their collective stupidity. Just suck it up the same as contractors who never got paid or small business that went bust. I shared a lift with a stupid girl who had worked for Anglo and she could see no connection with the loss of services in society and her former company’s bad business decisions
Comments closed for Seanie et pals court case-but open for actual current staff working 9-5 same as u-shame on you Journal
Good. Finally a little bit of justice. It appears the country is slowly releasing its head from its anoos
Maybe I’m Missing something, but if you leave a job for a better offer, especially if the company you work for is in trouble, you’re not entitled to reduntancy!!!!!!
“The reason for this, according to the IBOA, is because creditors of the IBRC could legally pursue payments made to those who left early.”
Excellent. They can go after Fitzpatrick then, biggest payout in one person right there.
The lapdogs for the leprechauns who ruined the country,let them starve,call it the Anglo famine.
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